Consumer cooperatives are enterprises owned by consumers and managed democratically which aim at fulfilling the needs and aspirations of their members.[1] They operate within the market system, independently of the state, as a form of mutual aid, oriented toward service rather than pecuniary profit.[2] Consumers' cooperatives often take the form of retail outlets owned and operated by their consumers, such as food co-ops.[3] However, there are many types of consumers' cooperatives, operating in areas such as health care, insurance, housing, utilities and personal finance (including credit unions).

In some countries, consumers' cooperatives are known as cooperative retail societies or retail co-ops, though they should not be confused with retailers' cooperatives, whose members are retailers rather than consumers.

Model of Robert Owen's visionary project for a cooperative settlement. Owenites fired bricks to build it, but construction never took place.

Consumer cooperatives rose to prominence during the industrial revolution as part of the labour movement. As employment moved to industrial areas and job sectors declined, workers began organizing and controlling businesses for themselves. Workers cooperative were originally sparked by "critical reaction to industrial capitalism and the excesses of the industrial revolution." The formation of some workers cooperatives were designed to "cope with the evils of unbridled capitalism and the insecurities of wage labor".[5]

The first documented consumer cooperative was founded in 1769,[6] in a barely furnished cottage in Fenwick, East Ayrshire, when local weavers manhandled a sack of oatmeal into John Walker's whitewashed front room and began selling the contents at a discount, forming the Fenwick Weavers' Society.

In the decades that followed, several cooperatives or cooperative societies formed including Lennoxtown Friendly Victualling Society, founded in 1812.[7]

The philosophy that underpinned the cooperative movement stemmed from the socialist writings of thinkers including Robert Owen and Charles Fourier. Robert Owen, considered by many as the father of the cooperative movement, made his fortune in the cotton trade, but believed in putting his workers in a good environment with access to education for themselves and their children. These ideas were put into effect successfully in the cotton mills of New Lanark, Scotland. It was here that the first co-operative store was opened. Spurred on by the success of this, he had the idea of forming "villages of co-operation" where workers would drag themselves out of poverty by growing their own food, making their own clothes and ultimately becoming self-governing. He tried to form such communities in Orbiston in Scotland and in New Harmony, Indiana in the United States of America, but both communities failed.

Similar early experiments were made in the early 19th century and by 1830 there were several hundred co-operatives.[8]Dr William King made Owen's ideas more workable and practical. He believed in starting small, and realized that the working classes would need to set up co-operatives for themselves, so he saw his role as one of instruction. He founded a monthly periodical called The Co-operator,[9] the first edition of which appeared on 1 May 1828. This gave a mixture of co-operative philosophy and practical advice about running a shop using cooperative principles.

The first successful organization was the Rochdale Society of Equitable Pioneers, established in England in 1844. The Rochdale Pioneers established the ‘Rochdale Principles’ on which they ran their cooperative. This became the basis for the development and growth of the modern cooperative movement.[10] As the mechanization of the Industrial Revolution was forcing more and more skilled workers into poverty, these tradesmen decided to band together to open their own store selling food items they could not otherwise afford.

With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rochdale Principles, and over a period of four months they struggled to pool one pound sterling per person for a total of 28 pounds of capital. On December 21, 1844, they opened their store with a very meagre selection of butter, sugar, flour, oatmeal and a few candles. Within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods.

The Co-operative Group formed gradually over 140 years from the merger of many independent retail societies, and their wholesale societies and federations. In 1863, twenty years after the Rochdale Pioneers opened their co-operative, the North of England Co-operative Society was launched by 300 individual co-ops across Yorkshire and Lancashire. By 1872, it had become known as the Co-operative Wholesale Society (CWS). Through the 20th century, smaller societies merged with CWS, such as the Scottish Co-operative Wholesale Society (1973) and the South Suburban Co-operative Society (1984).

Consumer cooperatives utilize the cooperative principle of democratic member control, or one member/one vote. Most consumer cooperatives have a board of directors elected by and from the membership. The board is usually responsible for hiring management and ensuring that the cooperative meets its goals, both financial and otherwise. Democratic functions, such as petitioning or recall of board members, may be codified in the bylaws or organizing document of the cooperative. Most consumer cooperatives hold regular membership meetings (often once a year). As mutually owned businesses, each member of a society has a shareholding equal to the sum they paid in when they joined.

Large consumers' co-ops are run much like any other business and require workers, managers, clerks, products, and customers to keep the doors open and the business running. In smaller businesses the consumer/owners are often workers as well. Consumers' cooperatives can differ greatly in start up and also in how the co-op is run but to be true to the consumers' cooperative form of business the enterprise should follow the Rochdale Principles.

The customers or consumers of the goods and/or services the cooperative provides are often also the individuals who have provided the capital required to launch or purchase that enterprise.

The major difference between consumers' cooperatives and other forms of business is that the purpose of a consumers' cooperative association is to provide quality goods and services at the lowest cost to the consumer/owners rather than to sell goods and services at the highest price above cost that the consumer is willing to pay.[citation needed] In practice consumers' cooperatives price goods and services at competitive market rates.[citation needed]

Where a for-profit enterprise will treat the difference between cost (including labor etc.) and selling price as financial gain for investors, the consumer owned enterprise may retain this to accumulate capital in common ownership, distribute it to meet the consumer's social objectives, or refund this sum to the consumer/owner as an over-payment. (Accumulated capital may be held as reserves, or invested in growth as working capital or the purchase of capital assets such as plant and buildings.)

While some claim that surplus payment returns to consumer/owner patrons should be taxed the same as dividends paid to corporate stock holders,[11] others argue that consumer cooperatives do not return a profit by traditional definition, and similar tax standards do not apply.[12]

Since consumer cooperatives are run democratically, they are subject to the same problems typical of democratic government.[citation needed] Such difficulties can be mitigated by frequently providing member/owners with reliable educational materials regarding current business conditions.[13]

January 1947 Co-op Magazine back cover designed as a promotional poster

Many advocates of the formation of consumer cooperatives - from a variety of political perspectives - have seen them as integral to the achievement of wider social goals.

Thus, the founding document of the Rochdale Pioneers, who established one of the earliest consumer cooperatives in England in 1844, expressed a vision that went far beyond the simple shop with which they began:

"That as soon as practicable, this society shall proceed to arrange the powers of production, distribution, education, and government, or in other words to establish a selfsupporting home-colony of united interests, or assist other societies in establishing such colonies."[14]

Cooperative Federalists, a term coined in the writings of Beatrice Webb, were advocates for the formation of federations of consumer cooperatives as means of achieving social reform. They anticipated such a development as bringing a broad set of benefits including economic democracy and justice, transparency, greater product purity, and financial benefits for consumers.[15]

University Co-operative Bookshop Ltd, Australia's largest consumer cooperative, established by students in 1958, has grown to become the largest provider of educational, professional and lifelong learning resources in Australia. With over 40 branches across Australia, a comprehensive website and presence on the internet since even before the web, numerous additional services and over 1.3 million lifetime members, the Co-op is more than just a bookshop.

The Wine Society (Australian Wine Consumers’ Co-operative Society Limited), established in 1946, now has over 58,000 members. Also sources and sells premium wines under the Society label, runs comprehensive wine education courses and recognises excellence from young winemakers.

In Italy the Coop Italia chain formed by many sub-cooperatives controlled 17.7% of the grocery market in 2005.

In Finland the S Group is owned by 22 regional cooperatives and 19 local cooperative stores, which in turn are owned by their customers. In 2005 the S Group overtook its nearest rival Kesko Oyj with a 36% share of retail grocery sales compared to Kesko’s 28%.[16]

Japan has a very large and well-developed consumer cooperative movement with over 14 million members; retail co-ops alone had a combined turnover of 2.519 trillion Yen (21.184 billion U.S. Dollars [market exchange rates as of 11/15/2005]) in 2003/4.[17] In Japan, Co-op Kobe (コープこうべ) in the Hyōgo Prefecture is the largest retail cooperative in Japan and, with over 1.2 million members, is one of the largest cooperatives in the world. In addition to retail co-ops there are medical, housing and insurance co-ops alongside institutional (workplace based) co-ops, co-ops for school teachers and university based co-ops.

Approximately 1 in 5 of all Japanese households belongs to a local retail co-op and 90% of all co-op members are women. (Takamura, 1995). Nearly 6 million households belong to one of the 1,788,000 Han groups (Japanese Consumers' Co-operative Union., 2003). These consist of a group of five to ten members in a neighbourhood who place a combined weekly order which is then delivered by truck the following week. A particular strength of Japanese consumer co-ops in recent years has been the growth of community supported agriculture where fresh produce is sent direct to consumers from producers without going through the market.

Some of co-op organisations, for examples, in Tokyo metropolis and Kanagawa prefecture, manages its local politic parties from 1970's; generally names itself as the "Network Movement" ("Tokyo Seikatsusha (it means "Living Persons") Network",[18] "Kanagawa Network Movement",[19] and so on.). They depend on consumers movement, feminism, regionalism, and prefer to anti-nuclear. These parties keep small but steady sections in prefecture and municipal assemblies.